Cartel Behaviour and Futures Trading
AbstractIn this paper we explore how a cartel which is able to cooperate to a limited degree on a futures market may be able to implement a cooperative production plan which would be self-enforcing. The basic result of the paper is that appropriately chosen initial allocations of long positions in the futures market will induce members to implement noncooperatively any cooperative outcome a cartel might desire, but which would be unachievable otherwise because production quotas cannot be enforced directly. The optimal cartel futures policies are characterized both with and without side-payments. Possible obstacles to these policies are analysed. In particular we explicitly characterize the conditions under which the cartel futures policies will fail because they result in a corner of the futures market.
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Bibliographic InfoPaper provided by European Science Foundation Network in Financial Markets, c/o C.E.P.R, 77 Bastwick Street, London EC1V 3PZ in its series CEPR Financial Markets Paper with number 0014.
Date of creation: Jun 1991
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- Le Coq, Chloé, 2003. "Long-Term Supply Contracts and Collusion in the Electricity Markets," Working Paper Series in Economics and Finance 552, Stockholm School of Economics.
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